Response to the following questions:
1. What is a ratio? How do ratios help to alleviate the problem of size differences among firms?
2. What does each of the following categories of ratios attempt to measure?
(a) liquidity;
(b) long-term borrowing capacity;
(c) profitability.
Name a group of users who might be interested in each category.
3. Brown Company earned 5.5% on sales in 2011. What further information would be needed to evaluate this result?